EU says survival at risk as ministers face Irish crisis

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The European Union raised the stakes over the Irish debt crisis on Tuesday, saying the future of the eurozone and EU are at risk as ministers head for talks on an increasingly probable rescue.

With pressure threatening Portugal but Spain insisting it is safe from contagion, Ireland signalled it might accept help and an Irish newspaper said this would focus on a rescue for its stricken banks.

Irish Finance Minister Brian Lenihan indicated he will accept targeted eurozone support to prop up lenders amid pressure from the European Central Bank and certain political partners.

"We have to discuss these matters with partners as to how best we can underpin financial and banking stability within the euro area," Irish Prime Minister Brian Cowen admitted.

"There are monetary policy situations arising now because of the turbulence on markets.

"We are engaged with our counterparts in relation to discussing with them how best be underpin banking and financial stabilities."

EU president Herman Van Rompuy raised the stakes when he said the EU's very future could be at stake.

"If we don't survive with the eurozone we will not survive with the European Union," he said.

In Madrid, Economy Minister Elena Salgado insisted that there was no reason why Spain should be affected by alarm on financial markets about the state of Irish and Portuguese finances.

At least one state indicated to AFP though that it is fed up offering bailout assistance -- Iceland and Latvia also benefit from its taxpayers' solidarity -- and suggested the outcome of talks in Brussels from 1600 GMT is not a foregone conclusion.

Finance ministers are to grapple with an exploding debt crisis that has already brought Greece to its knees, requiring a 110-billion-euro international bailout, and with Portugal also admitting it is at "high" risk of needing emergency help.

The urgency this time is due to massive debt write-downs arising from a property crash. Ireland's public deficit this year is set to pass 30 percent of GDP, 10 times the permitted EU limit and double last year's Greek deficit.

Ireland "is under pressure from some other EU politicians and even the ECB to consider requesting funds to provide further reinforcement for its banking system and so reduce contagion risks," said Julian Callow of London-based Barclays Capital Research.

He said analysts expect the ECB to announce "further steps towards normalization of its money market operations" at the start of December, whereas "Ireland has the biggest skew in terms of requesting ECB financing," signalling 130 billion euros of demands on the Irish central bank in October.

A source at the Luxembourg-based 440-billion-euro European Financial Stability Fund set up by eurozone leaders to prevent the Greek crisis from spreading said there was nothing to prevent money being pumped into Dublin purely to stabilize its banks.

"Ten billion of the money for Greece was for its banking sector. The percentage is a matter for political decision," he underlined when asked by AFP if it could run to 100 percent.

Experts say Dublin will need about 70 billion euros, and Eurogroup head Jean-Claude Juncker along with the ECB, the European Commission and the International Monetary Fund each also say they are ready to act as soon as possible if asked.

Ireland is still drawing up massive new spending cuts to be announced within weeks.

In a significant development, Northern Ireland's Sinn Fein leader Gerry Adams announced at the weekend he was resigning from British politics. He said he wanted to seek office in the Irish parliament and campaign for a different policy response to the crisis.

Twenty-four of the EU's 27 states are currently running deficits way above EU limits.

Others are also feeling the heat -- with Spain notably having to offer interest to conclude a bond sale on Tuesday. There is concern that any contagion to Spain would take the crisis to a new level since the Spanish economy is the fifth biggest in the EU.

Bond yields for Ireland, Portugal and Greece all remain high. The speculation has hurt the euro, and European stock markets fell appreciably on Tuesday.

Greek Prime Minister George Papandreou has said he has support from French President Nicolas Sarkozy to re-schedule Athens' bailout repayments.

But one diplomat said of the growing claims for assistance: "We have already done our share. Our finance minister will be rather tough -- this is a big thing for us.

"We've always been the good guys -- but there's a limit to that understanding."

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